Last year, Lululemon veteran Christine Day and husband-and-wife duo Russell Wilson and Ciara founded The House of LR&C, a Seattle-based multi-brand fashion house. The company launched two brands called Lita and Human Nation within two years, and added the Good Man brand, previously launched by Wilson, founded in 2015. Today, Day said she was ready to start. to develop the company in a major way.
To do this, the company called on David Adelman, the founder of Darco Capital, who has invested in more than 60 brands including Lids and Margaux. He has acted both as an investor and a member of the board of directors of these brands. Adelman will advise and help The House of LR&C secure additional funding.
The growth trajectory of Maison LR&C and the foundations Day laid for the future of the company is a case study of how to create a new kind of American fashion business. Realizing the hurdles other multi-brand companies like Gap and Victoria’s Secret have faced, Day said the key will be finding the right balance between wholesale and DTC.
“Wholesale margins are half of DTC’s margins,” Day said. “But the wholesale business is still very valuable. We were able to work with Nordstrom and Kohl’s to meet our minimum purchases, which helps us turn inventory into cash faster. [That] can then be used for our DTC activity.
Day said DTC-focused startups would be wise to think carefully about their wholesale strategy before trying it. Many have their production and marketing costs set for the much higher DTC margins and then cannot handle the lower wholesale margins. For House of LR&C, Day said she designs her margins with wholesale in mind first, to make sure they are achievable.
Good Man, which has grown 50% over the last year and accounts for 82% of the company’s sales, compared to the two new brands Human Nation and Lita, is the best-selling heavyweight. The brand is sold through Nordstrom, with 29 different SKUs being restocked at the retailer. Good Man is also the best-selling modern men’s brand at Nordstrom, beating older brands like Theory.
For Human Nation and Lita, Day said DTC will be a stronger growth engine and build on Wilson and Ciara’s fame as a marketing tool. Day said when the couple posts images on social media about a date while wearing designer clothes, traffic increases by an average of 1,500%. This helps reduce some of the expense inherent in DTC, which has higher marketing costs than wholesale. The brands have also worked with other celebrities and influencers like Halle Berry.
Currently, DTC sales account for around 15% of the larger company, although that number will likely increase as Human Nation and Lita grow into larger companies.
Adelman said he was convinced by Day’s vision for the company that a multi-brand house could start by launching two brands from the start.
“With a typical startup, you would be worried about moving the business forward,” Adelman said. “Why start with three brands at once? Why not have just one brand to start? But Christine has experience in running complicated businesses. It takes a lot of risk away from me.
Day compared what she does with House of LR&C to Gap and Victoria’s Secret, which have cannibalized with other brands in their portfolios. There isn’t enough distinction between Gap and Banana Republic at the product level, for example, to justify the two brands, according to Day. His company’s brands, however, are intentionally distinct. Good Man is a modern brand for men, similar to Theory or Scotch & Soda, while Lita is a contemporary brand for women and Human Nation is youth-focused and streetwear-inspired.
The last piece of the puzzle, Day said, is ensuring profitability.
“I am fighting with companies that have gone public and yet have no path to profitability,” Day said. “Got $ 100 million in sales and you’re still not profitable?” Sometimes there are reasons to postpone profitability, but especially in apparel, it’s usually not sustainable and it’s not the kind of business we want to build.